2008 News Releases

DALLAS—Globalization may reduce incentives to enact strong patent laws in many countries, and international agreements may help achieve the right level of intellectual property protection, according to the March issue of the Federal Reserve Bank of Dallas’ Economic Letter.

The March Economic Letter can be found at: http://dallasfed.org/research/eclett/2008/el0803.html

In “Intellectual Property Protection in a Globalizing Era,” Senior Research Economist and Advisor Edwin Lai says two factors influence nations’ incentives to protect intellectual property (IP): the capacity to innovate and market size. They create tensions between technology-rich developed countries and developing nations.

International agreements that require at least some countries to strengthen patent protection can potentially increase global welfare when implemented in conjunction with other market-opening measures, Lai concludes.

IP protection is important because IP-sensitive goods contribute a great deal to the U.S. economy, according to Lai. In 2003, consumption of those goods was about 17 percent of U.S. GDP, and they constituted 40 percent of goods and services exports.

“Globalization should benefit American consumers because U.S. producers of IP-sensitive goods, such as pharmaceuticals, are able to sell to a larger market in which foreign countries at least partly foot the R&D bill,” Lai writes.

While the U.S. receives the greatest benefit from foreign countries increasing patent protection, excessive protection can create such adverse effects as encouraging excess litigation and reducing access to affordable knowledge goods, Lai finds.